Is quantitative easing working?

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Kai Ryssdal: Back about six weeks ago, the Federal Reserve formally announced its latest plan to get more money out into the economy. The technical term is quantitative easing, which rapidly became QE2 in the vernacular, as it was the second time the Fed had gone down that particular road, buying treasuries note and other bonds from banks. In this case, $600 billion worth.

The basic idea was to fill bank vaults with cash to encourage more lending and so bring down interest rates to encourage more spending. Never mind that long-term interest rates have actually been going up since then.

A top central banker declared today that the big bond-buying program has been at least modestly successful so far. We asked our senior business correspondent Bob Moon to prove it.

Bob Moon: Today's rosy claim was delivered by the head of the St. Louis Fed, James Bullard, in an interview with CNBC. His reasoning: The economy is warming up.

James Bullard: Many people are marking up their forecasts for the current quarter and into 2011, so I think right now it looks like we'll see a stronger recovery than we anticipated even a little while ago.

But three economists we spoke to today aren't convinced there's a "cause and effect" relationship between the Fed's actions and the accelerating economy.

David Wyss: Especially when you realize that most of the growth that you're seeing has been spurred by the consumer.

David Wyss is chief economist at Standard & Poor's. He says the main indication of success would be more lending by banks, but there's been no sign of that so far. Even so, he says it's impossible to know for sure what effect the Fed's bond-buying spree is having, because it amounts to trying to prove a negative.

Wyss: You don't know what would have happened if they hadn't done this. And I think generally you have to go with the theory, and the theory says that it should be having some effect.

But is it really necessary? At Federal Financial Analytics, Karen Petrou says the economy might be improving even without the Fed's cash injection. And she cautions there's a risk of future inflation if the Fed isn't careful with its spending plan.

Karen Petrou: It has to be judged not only by what it does while we're in it, but what happens as we get out of it -- the degree to which the Fed judges the market just right. That's why this is really risky, the Fed has to be perfect, and almost nobody ever is.